Microsoft Corp and the US Justice Department settled their three-year antitrust battle Friday, and several leaders of the 18 states suing the world's largest software maker said they may join the accord.
The settlement's centerpiece lets computer makers highlight rival software on the Windows operating system, instead of Microsoft applications, without fear of retaliation. Microsoft also must disclose the code needed for competing media players, instant messaging software and other programs to run on Windows.
Three leading state attorneys-general praised the agreement and suggested they might sign on by a judge's Tuesday deadline, even after their California counterpart said it would be irresponsible to move that quickly. Critics, including AOL Time Warner Inc, and Sun Microsystems Inc, said the deal leaves Microsoft free to abuse its software dominance and urged the states to press for tougher remedies.
The settlement "represents an enormous step forward," New York Attorney-General Eliot Spitzer said. Connecticut's Richard Blumenthal said the accord "holds the promise of making the market in this industry more competitive."
Microsoft stock, which surged more than 6 percent Thursday, fell US$0.44 to US$61.40 on Friday. The company's shares have risen 40 percent since the suit was filed in May 1998, compared with a 22 percent increase in the S&P's Computer Software and Services Index.
The agreement would end a fight that at one point threatened to transform the computer industry by splitting Microsoft in two.
Microsoft would escape without having to strip any programs out of its flagship product, the Windows operating system software that runs 95 percent of the world's personal computers.
Microsoft Chairman Bill Gates, accused of arrogance by the case's original trial judge, sounded a conciliatory note today.
The protracted legal battle "has had a profound impact on me personally and our company," he said. "We will focus more on how our actions affect other companies."
Microsoft still faces a separate probe by the EU into the emerging market for the "server" software that powers large computers running corporate networks.
Although the server business wasn't a central issue in the Justice Department case, the code-sharing provision in the settlement would apply to server software. The provision will prevent Microsoft from using its Windows monopoly to restrict competition from rival servers, the Justice Department said.
Microsoft reached the deal with a Republican Justice Department that long ago signaled it was less enthusiastic about the case than the Democrats who filed it when Bill Clinton was president.
President George W. Bush's administration previously announced it would abandon a breakup of Microsoft that was ordered by a federal judge and overturned by an appeals court.
Justice Department antitrust chief Charles James said the agreement "brings certainty and stability to the computer industry."
The proposal would "obtain relief that stops Microsoft from engaging in unlawful conduct, prevent any recurrence of that conduct in the future and restore competition in the software market," he said.
At a hearing today, US District Judge Colleen Kollar-Kotelly gave the states until Tuesday, when she will hold another hearing, to decide whether to endorse the accord. The states requested the extra time so they could exercise "due diligence," said Iowa Attorney General Tom Miller.
"A settlement is always going to be in a gray area," Miller said after the hearing. "There are things that we like and things that we don't like."
The attorney-general for the largest state, California's Bill Lockyer, said in a statement that he won't sign the 21-page document until he fully understands it.
Illinois Attorney-General Jim Ryan, a Republican running for governor next year, said that, pending a staff review, he's "inclined to sign on to the settlement because the terms appear to achieve the overall objectives of our lawsuit."
The two sides hammered out the final terms of the settlement only last night, a month after Kollar-Kotelly ordered around-the-clock settlement talks. The turning point came midday Wednesday, when all sides realized an agreement was within their reach, according to Eric Green, the Boston University law professor who served as mediator.
Any final agreement needs Kollar-Kotelly's approval, and several industry groups have vowed to challenge the accord as not in the public interest. That process is likely to last through February, the judge said in court today.
Microsoft's Windows operating system runs 95 percent of the world's personal computers, and critics fear the company will extend its monopoly into other markers such as the Internet.
AOL Time Warner, the largest Internet service company, said the agreement "does too little to promote competition and protect consumers."
Michael Morris, Sun Microsystems Inc's general counsel, said the decree lacked teeth, leaving "a host of ways Microsoft can put their thumbs on the scales the federal government will never figure out. They have shown that time after time."
Sun will seek to persuade the judge to reject the agreement, he said.
James said the US government "anticipates there will be broad state support" for the settlement. He said the Justice Department won't negotiate any changes, although the states are free to reach separate agreements with the software giant.
Although Kollar-Kotelly said in court that she hadn't studied the agreement, she praised the parties for their efforts and suggested the terrorist attacks had heightened the need for a quick resolution.
"I'm pleased that in this time of rapid national change, they were able to resolve their differences," she said during the 30-minute hearing.
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